Construction Informer

Just Build It Right: In Biskra, Algeria, the housing and town planning minister is cracking down on what he calls “urban anarchy” in building. Armed with additional funds the organizations that police compliance with building codes are imposing sanctions on builders who violate the “rules of urbanism and construction.” While a lot of the rest of the world reels under the current economic storm it seems Algeria is on a growth path. According to the International Monetary Fund the country is expected to post 4.9 percent growth in 2008 and 4.5 percent in 2009.

South Korean Builders On Growth Path: South Korean builders are building more and more of the Middle East. With overall construction orders up a record 45.4 percent year-on-year the boom is being enjoyed by medium and large firms alike. South Korean builders are also increasingly grabbing contracts throughout Asia with a 56 percent gain in that sector. In one interesting collaboration a consortium of South Korean construction companies won a $6.3 billion refinery project in Kuwait. The country’s builders are also handling desalinization and gas facility projects.

Concrete Figures Prominently In Africa: Tanzania is undertaking the construction of the single largest cement plant in the east African region. Expecting demand in that area to grow at twice the rate of projected economic growth of 5 to 6 percent, Kenya’s Athi River Mining (ARM) company will build the plant with a capacity of 4,000 tonnes (4,480 tons) a day. Funding for the project was concluded before the world’s recent economic crisis and it drew from both national and international sources. A spokesman for the project said a reduction in the demand for cement because of the market turmoil is not expected to be significant. ARM is the second largest cement maker in Africa.

Marketing With Topical Messages: A new initiative in New York is offering to answer a lot of questions about green building. This is unique because it isn’t a government effort but rather a grass roots business effort. Named The Hamptons Green Alliance the site is claimed to be the first ever consortium formed by local building companies that is committed to green initiatives in building. Designed with consumers in mind the site features articles on the diverse topics of alternative energy, insulation, smart home electronics, HVAC and natural landscaping.

This is an interesting concept since it brings builder and trades together in a single marketing effort that directly targets topical information that is very much on people’s minds these days. It could be as construction businesses continue to find value in more transparent business relationships with each other, more of these efforts will surface. From the perspective of someone who wants to have a home built there is a certain comfort in knowing all the players who will be doing the job are working as a team, and something like this illustrates that to a certain degree.

Tax Break Gets Extended: There is of course a whole lot more in the “bailout” bill than most people probably realize. Some of it makes sense. For example, anytime the government gives people a tax break to do smart things I tend to gauge that as making sense. One of the things in the bill that got included was the cancellation of the expiring energy efficiency tax break for commercial buildings as reported on in this post. Figuring out to about $1.80 per square foot, the deduction could be just the ticket to get some owners to consider moving forward with their plans.

Do You R&D? In construction it may be overlooked but there are efforts that those in the AEC fields do regularly that might qualify as research and development. New processes, and new designs and improvements on existing processes and designs could all qualify for the now-extended R&D tax credit. Even testing and investing in research and development could not only be beneficial from an operational point of view, but also from a tax point of view. With this credit being extended until the end of 2009 there may be enough time to continue with, or start new efforts in this area that could be brought to fruition before the expiration date.

Independent contractor status keeps surfacing. Several states have been adding legislation aimed at discovering workers who are misclassified. Typically the legislation creates a process that helps the worker to first of all determine if in fact they are independent contractors under the law, and then, if not, they supply processes whereby the employee can petition the government to make a determination without fear of retaliation.

There is a bill pending in Congress, H.R. 5804, that would provide a safe harbor for taxpayers (read employers and others who hire people to do things like work on construction sites, clean their houses and do their laundry) who have fulfilled a couple of requirements so that long standing independent contractor relationships could be validated and approved. By my reading of the bill there didn’t appear to be any undue requirements being placed on the employer or independent contractor. Later the Bill stipulates that any individual who performs services for a “taxpayer,” can request their status to be reviewed at any time within a year after a determination has been made.

We all know where this is going - it’s about making sure that taxes are being paid. There may be a side benefit in that it could help people who are working for someone and are misclassified as independents, when in fact they are employees. Unscrupulous people will always try to get something for nothing and this is one way it’s done. It may also be trying to ferret out illegal workers who are not citizens.

An organization by the name of Coalition for Independent Contractor Freedom points to these legislative efforts as ones that are trying to take away an individual’s right to be self employed, independent contractors. This organization bills itself as “A Voice for Independent Contractors,” and includes articles about how those independent contractors may become victims of government regulations and includes an opportunity to make a donation.

In the three legislative actions I’ve looked at the focus appeared to be helping people who may be misclassified as independent contractors to remedy the problem, not to unduly burden their ability to work as independent contractors. 

From my experience in construction there are far too many “independent contractors,” who are siphoning off valuable work from people, (even from other independent contractors who really fit the definition), who are in the business for the long haul - not just to make a quick buck while they wait for the next job to come along. These same nascent independents will be the first ones to go on the public dole or sue the people who hire them when the opportunity arises. 

I don’t like a lot of laws, but sometimes people just take too much advantage and laws are one way to keep the playing field level.

As the built environment continues on its path of price adjustment there are few places on the globe where that adjustment isn’t taking place.

According to one British news report Barratt Developments is cutting its new home prices nearly in half and other builders there are building higher and selling cheap. A Barratt spokesperson says the discounts don’t necessarily reflect the company’s typical sales policy. Economists in Britain are saying house prices may be dropping by 30 percent between now and 2010.

The 100 biggest home builders in Australia noted a 5.7 percent decline in housing starts during 2007-2008. Housing starts are expected to fall another seven percent there during the remainder of 2008 and during 2009. At the same time Australia is anticipating more fallout from the slowing of construction in China. Australia’s major export is iron ore and the Chinese will be needing less of it as its building businesses slow due to the tighter credit markets.

In India builders of flats are contending with a custom called the “carpet rule.” Basically the square footage they are supposed to charge for should only include the inside dimensions - the floor area that would be covered with carpet. The dimensions included in the wall thickness, balconies, hallways, and stairs are not included in the price. Although we all know that somehow it must be. Builders have been ignoring the rule and so some charge that prices have gone up by 50 percent. With square foot costs at Rs. 25,000 ($536) per square foot it’s easy to see why some people might be crying foul.

Finally, in the U.S., at least in some markets, high end homes are showing weakness. Luxury builders in the Charlotte area are selling off prime lots and cutting deals to get rid of spec homes. Expensive homes there have been feeding the desires of the area’s financial services sector for the past decade.

According to a recent report in The Economic Times construction firms involved with infrastructure in India are in a boom time. Not only are their orders full for this year but most of them have all they can do for the next two to three years.

“The infrastructure sector in India is set to expand significantly with planned high investments. The increasingly complex nature of projects and a larger participation from the private sector are fueled by high expectations from various stakeholders,” Crisil research said in its recent report.

Interestingly, one company reports that 65 percent of the work is in water-related infrastructure and environment.

As the Middle East wrings the profits out of its dwindling oil fields, U.S. construction-related companies are finding some sanctuary there from the economic downturn at home. According to one report in Zawya, a manufacturer of cement mixing trucks is planning on increasing its business in the Middle East from less than five percent to 20 percent over the next few years.

The Big 5 PMV (23-27 November), a sort of mega-machinery and construction equipment show held in Dubai, is poised to showcase an abundance of American companies hoping to score some business in the region.

There are also other incentives that have to do with currency prices.

“US companies make dependable trading partners because we have several decades of successful collaboration with the Middle East,” said Woody Nash, Director of Business Development, Boomerang Systems, Inc., New Jersey. “It also helps that the dollar is weak compared to the Euro.”

The United Arab Emirates is currently the largest export market for U.S. goods and services in the Arab world and that presence expanded four-fold from 2000 to 2007.